The effect of economic uncertainty on inventory and working capital for manufacturing firms

Dbouk, Wassim; Moussawi-Haidar, Lama; Jaber, Mohamad Y.

doi:10.1016/j.ijpe.2020.107888

Cited by 22 publications

(22 citation statements)

References 91 publications

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“…The increases in inventory that we observe in the lead up to Brexit are most pronounced for each of low cash firms, and less indebted firms. Holding more stock is consistent with Dbouk et al (2020) and with Bord Bia (Irish Food Board) who highlight the practice of stockpiling among Irish food and drink manufacturers in 2019. Irish SMEs appear to hold more stock for fear of supply chain frictions or input price fluctuations.…”

Section: Discussion Of Empirical Resultssupporting

confidence: 69%

“…Furthermore, the likelihood of stockouts could be minimized with opportunities for arbitrage considering price variations. In the context of economic uncertainty, Dbouk et al (2020) found macroeconomic uncertainty raises the level of inventory for manufacturing firms such that greater uncertainty of demand increases the volume of safety stock. Thus, we posit the following:…”

Section: Inventorymentioning

confidence: 99%

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Building financial flexibility in preparation for Brexit: the case of Irish medium sized enterprises

McNamara

O’Connor

O’Donohoe

2023

The Irish Journal of Management

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The purpose of this paper is to examine the building of financial flexibility by Irish medium sized enterprises in the run-up to Brexit. We analyze changes in firms’ dividends, leverage, cash, investment levels and working capital in the period surrounding the passing of the Brexit referendum to test for stockpiling of financial slack. Whilst we find no evidence of financial flexibility building overall, there is some evidence to suggest that firms incentivised to build such flexibility do so. Cash poor firms appear to build financial slack by way of reducing leverage and increasing their cash reserves. In contrast, cash rich firms increase their capital expenditure using internal and external funds. Interestingly all firms irrespective of their size or financial strength increase their working capital investment and in particular build their inventory levels post the Brexit referendum. Our evidence suggests Irish medium sized enterprises are optimistic of the opportunities post Brexit.

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Section: Discussion Of Empirical Resultssupporting

confidence: 69%

Section: Inventorymentioning

confidence: 99%

Building financial flexibility in preparation for Brexit: the case of Irish medium sized enterprises

McNamara

O’Connor

O’Donohoe

2023

The Irish Journal of Management

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“…In this study, it is suitable to use dynamic variables because the equation includes a lagged variable of the dependent variable as the explanatory variable (Anderson & Hsiao 1981). Under the dynamic models, when series are persistent or if the variance of individual-specific effect is large relative to the variance of the error, the first-differenced GMM estimator of Arellano and Bover (1995) suffers from bias (Dbouk et al 2020). Hence, the baseline equation model is estimated by the system GMM model created by Arellano and Bover (1995), and Blundell and Bond (1998) with the orthogonal transformation to overcome possible endogeneity and heterogeneity issues and eliminate the autocorrelation problem.…”

Section: Methodsmentioning

confidence: 99%

Cash - Cash Flow Sensitivity: Evidence From Emerging Markets

Tan

Avcı

2022

Muhasebe Bilim Dünyası Dergisi

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This study analyzes cash-cash flow sensitivity by comparing financially constrained and unconstrained firms in eight markets. 486 manufacturing firms are examined between 2005 and 2018 using the Generalized Method of Moments. These firms are categorized based on size, age, and Size-Age, Sales-Age, and Kaplan and Zingales indices. We find that both constrained and unconstrained firms evince positive cash-cash flow sensitivity. Although unconstrained firms obtain external financing easily, they prefer to first use internally generated funds in accordance with the pecking order theory. The results also reveal that cash-cash flow sensitivity cannot be used to test financial constraints in emerging markets.

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“…To improve the state of settlements with counterparties it is necessary to control the ratio of accounts receivable and payable [7][8][9]. A large amount of accounts receivable negatively affects the financial stability and causes the need to attract additional resources [10][11][12][13][14]. At the same time, an increase in accounts payable leads to insolvency of the economic entity, reducing the investment attractiveness [15][16][17].…”

Section: Introductionmentioning

confidence: 99%

Internal control of transactions operation in the sustainable management system of organizations

et al. 2021

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In modern conditions one of the main problems of economic entities is the increase in accounts receivable and payable, which is influenced by objective and subjective factors. In this connection the role of internal control of settlement operations is increasing. The aim of the article is to improve methodological support of internal control of settlement operations for increasing the quality of audit, providing information about the state of settlements with contractors to the management of enterprise for making operational and strategic management decisions. The proposed methodological support is based on stage-by-stage audit of settlement operations including the following main stages: audit planning; implementation of control procedures; execution of audit results. the peculiarity of internal control of settlement operations is determined by a variety of normative and information support of the audit. For the purpose of improvement of control procedures in the course of the study working documents of internal control have been developed. The working document «Verification of the availability of the agreement with a separate counterparty» can be used by the controller to identify errors arising in the preparation of the contract, as well as to determine the completeness and timeliness of the parties to fulfill their obligations, With the proposed in the study working document «Confirmation of the status of settlements with counterparties» can identify cases of fraud and misstatement of data contained in the financial statements. In the course of the study it was proposed to perform a point-rating assessment of debtor reliability based on a system of key indicators in the internal control process. The suggested rating estimation of counterparties will make it possible to carry out their comparative analysis and grouping as well as to identify those counterparties that have a high probability of non-payment of existing debts. The practical significance of the study lies in the possibility of using the developed approaches to determine the information base, to set the purpose and definition of control tasks, to the rational choice of control procedures, to the use of working papers in the process of internal control of settlement operations.

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The effect of economic uncertainty on inventory and working capital for manufacturing firms

Cited by 22 publications

References 91 publications

Building financial flexibility in preparation for Brexit: the case of Irish medium sized enterprises

Building financial flexibility in preparation for Brexit: the case of Irish medium sized enterprises

Cash - Cash Flow Sensitivity: Evidence From Emerging Markets

Internal control of transactions operation in the sustainable management system of organizations

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